Hon Hai CPO exchange cabinet delivery rumored to be advanced for Nvidia; full-optical technology with high gross margin becomes the second growth engine

Hon Hai Group (2317)’s industrial PC maker Foxconn Industrial (SHA: 601138) reportedly made major progress in the all-optical CPO switch market on Wednesday. Not only has it completed the first batch of cage deliveries to Nvidia ahead of schedule, but its shipment volume target has also been raised significantly. External observers widely believe this business will become the key second engine for Hong Hai’s profit-structure upgrade after AI servers.

Foxconn CPO cages delivered early; high demand prevents it from appearing at the Taipei Computer Show

According to Economic Daily News, the all-optical CPO switch cages produced at Hong Hai Group’s Vietnam plants have reportedly already completed delivery to Nvidia ahead of schedule. Due to demand far exceeding expectations, supplies have been extremely tight—so tight that even the sample cages originally planned for display were handed over to Nvidia as well, leaving not a single unit. Even the CPO switch display unit that Hong Hai previously planned to publicly unveil at this year’s Taipei International Computer Show (Computex) may now miss the event due to all stock being fully supplied to customers.

(Having just announced a partnership with Nvidia, optical-component maker Corning zeroed in on the optical transport CPO theme; its stock surged more than 13.68% intraday)

Foxconn Industrial raises shipment target; 50,000 units in 2026 to 2027

In terms of shipment scale, Foxconn Industrial originally estimated that full-year CPO switch shipments in 2026 would exceed ten thousand units; now reports say it has already raised the target to over 50,000 units across the two years from 2026 to 2027. As Hong Hai Group is currently Nvidia’s only outsourced manufacturing and design-manufacturing partner for all-optical CPO switches, it will directly benefit from infrastructure demand driven by the continued expansion of global AI compute power.

Foxconn Industrial previously said that as AI cluster sizes keep growing, the speed of data transmission and energy-consumption management are becoming increasingly critical. CPO (Co-Packaged Optics) technology integrates optical components directly next to the switch chip, greatly shortening the optoelectronic conversion path. While improving transmission efficiency, it also effectively reduces energy consumption—making it a core technology direction that is considered indispensable for next-generation high-end AI servers.

Hong Hai’s gross margin jumps; CPO business drives a shift in the profit structure

What the market expects most from the CPO business is not only shipment growth, but also its markedly stronger profitability versus traditional operations. Traditional server OEM/ODM businesses generally have gross margins around 5% to 8%, while CPO switches, with higher average selling prices (ASPs), have reached double-digit gross margin levels.

Financial institutions estimate that in 2026, CPO-related business will contribute more than 15% of Foxconn Industrial’s revenue, bringing a positive change to the group’s overall profitability structure. Foxconn Industrial also emphasized that 2026 will be an important turning point year for data-center optical communications, and the widespread adoption of CPO all-optical switches is an inevitable industry trend.

Hong Hai’s North American plants hit by hackers; cyber incident temporarily disrupts operations

Meanwhile, Hong Hai Group confirmed last night that it suffered multiple cybersecurity attacks. Since early May, large-scale network anomalies have gradually occurred at the company’s facilities in Wisconsin, USA, with some production lines reportedly experiencing brief stoppages. On May 12 late at night, Hong Hai released a major announcement confirming that some facilities in North America were subjected to cyber attacks, but it stressed that its cybersecurity team activated response mechanisms immediately, and that production and delivery operations at the impacted facilities have now resumed normal conditions.

(The Jingding equipment supplier of Hon Hai was extorted for hundreds of millions of dollars in cryptocurrency; Kuomintang legislator Ge Ruijun: the government should help companies with cybersecurity)

As Wisconsin plants serve as a major AI server production base for Hong Hai in North America, the group only signed a four-year operating incentive program with the Wisconsin Economic Development Corporation at the end of last year, committing to invest more than $569 million to expand the Lasin County plant area and fully push forward AI infrastructure expansion. After hearing the news today, Hong Hai’s share price at one point fell by about 3%, but the move has narrowed to 1.6% by now, tracking the broader market’s performance.

From early delivery of CPO switches and a major upward revision of the shipment target, to tangible improvement in the gross margin structure, the strategic position of Hong Hai Group in the AI infrastructure race is continuing to strengthen. Against the backdrop of Nvidia actively expanding its compute footprint, Hong Hai’s scarce value as Nvidia’s only all-optical CPO manufacturing partner is expected to keep standing out as demand expands, becoming an important pillar supporting the group’s long-term growth.

This article Hong Hai CPO switch cages delivered early to Nvidia; all-optical technology with high gross margin becomes the second growth engine was first published on Chain News ABMedia.